FedEx raised the alarm and investors in its arch-rival took notice.
Shares of United Parcel Service (NYSE: UPS) fell 3% at 2 p.m. ET after FedEx missed quarterly expectations and cut its full-year forecast.
To fall in sympathy
Trucking companies have been stuck in traffic in recent years. A surge in shipments after the height of the pandemic gave way to a slowdown as the economy cooled and interest rates soared, leading to soft prices.
The question for investors is how long the downward cycle will last. Judging by FedEx’s results, there will be no quick recovery.
FedEx missed top and bottom line expectations and cut its full-year earnings guidance. While UPS is a separate company and its business mix is ​​somewhat different from FedEx’s, investors are understandably concerned that the “challenging” market impacting FedEx will also hurt UPS’s results in the coming quarters. The outlook was weakest for FedEx’s premium offerings, suggesting a lack of pricing power in the coming months.
Is UPS Stock a Bargain?
UPS, like FedEx, is a pillar of the global economy. Its services are hard to replace, and there is a good chance that the company and its stock will outperform the market over time.
That said, it’s hard to escape the business cycle. And UPS’s new labor contracts, reached last year after tough negotiations, will weigh on results in the short term. Investors shouldn’t feel the need to rush to buy the dip.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FedEx. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
Why UPS Stock Is Falling Today was originally published by The Motley Fool
